(Yacht Investor article, February 2019)
Family time. Privacy. Status symbol. Relaxation. Party time. Performance. Cruising. Business. Leisure. Exploration. What do yacht owners and charterers think of when they envisage their next yacht purchase or charter? Julian Krickl explores…
From the beginning of 2019, I’ve been intrigued by what’s in store for the superyacht industry, both in the short and medium term, making a point to gather the opinions of friends and colleagues across the industry.
I’m intrinsically interested in all aspects which keep this industry running: charter, sales, design, management, shipyards, and legal – so I have been taking the temperature of the market, to try and predict the unpredictable – if such a thing is possible.
While our industry is given to expect macro led up-trends and down-trends (undulations that follow global economic health and especially sentiment amongst UHNW investors), we are somewhat insulated more than other industries, given the large means required to charter or to own a superyacht – as most yacht owners can choose their timing to buy/sell/charter, rather than whether they have the means to begin with.
Bigger and bigger superyachts
It would be over-zealous to say the yachting industry is in ‘rude health’. Nevertheless, the trend over the last 15-20 years has been to build and own larger and larger yachts, and the size increase shows no sign of abating.
This is underpinned by significant advancements in materials, design and ever-evolving new technologies by the top shipyards we are seeing at the vanguard of the industry.
Although brokerage in 2018 appears to be slightly down from 2017, over 400 superyachts (motor & sail combined, 24m+) were sold in 2018 with an average length of approximately 35m, according to Camper & Nicholsons.
The largest motor yacht sold in 2018 was of course the iconic 110m Jubilee – built by Oceanco, with 70m Sybaris by Perini Navi taking the crown of the largest brokerage sailing yacht sold in 2018. We are also seeing a strong increase in numbers of pre-owned yachts coming to the market for sale in the first quarter of 2019, due to seasonal focus on the summer in the Mediterranean.
More interestingly, there seems to be quite a few almost-complete new builds for sale, for those buyers willing to buy something new which is ready soon, ‘off the shelf’.
A buyer would have to weigh up having less they can change (with something already in-build), versus waiting 2-4 years build-time for something they can have full personalisation over.
On the pricing front in the pre-owned market, we are seeing a softening of prices, both with asking price reductions currently happening (in the run-up to the summer season), and the openness for sellers to accept discounted offers (where larger-than-normal discounts can be achieved from the asking price, by discerning buyers). Factors such as newness and scarcity can keep the final sale price of a yacht more rigid towards the asking price.
However, we are seeing long-ish average times to sell preowned yachts (average time to sell a pre-owned superyacht is a little over 2 years currently – a small decrease from 2017 to 2018). It makes sense that a seller whose boat has been for sale longer will potentially soften their acceptance price to get a deal done.
Prospects for the year ahead
Turning to charter in 2019… Growth in terms of the numbers of bookings is predicted in the Mediterranean market. We are hearing that more clients will be chartering, however, more yachts available for charter are coming onto the market in tandem with this – meaning that the market is predicting flat growth for owners, due to this supply increase.
On balance, we predict that charter rates in 2019 will remain fairly flat and quite steady as a result.
Newer yachts, which were launched in the past 1-2 years, are obviously the most popular and get predominantly booked up in December-February, and they carry a 10%-15% premium on charter rates due to this popularity and demand.
Older boats can obviously get booked up early by recurring clients and those who like a specific yacht or price, features, etc… but 50-60% of older vessels pick up their charter bookings within 2 months of the start of the charter: bargain-hunting being a familiar strategy by clients in the yacht market.
Territorially, we are seeing Greek charters on the up, especially as stock is more limited in Greek and Turkish waters, careful planning and booking ensuing, by those in the know. Better and newer boats (and in greater numbers) would be welcome for Cycladic and Ionian cruising, to push up charter economics and growth in the East Med.
What do clients want? Experiences.
An over-arching opinion I am hearing consistently from industry colleagues is that clients are looking for ‘experiences’ – an intangible which everyone is now talking about in all aspects of life, consumerism and especially luxury.
So, given the aforementioned improvements in design/build/ technology/facilities on-board modern yachts, clients take the high level of comfort and luxury as a given, for the money they are spending.
The value to them comes in the form of experiences, especially a great captain and crew who can take them ‘off-grid’ to more hidden gems and exclusive places that local knowledge and experience can offer (whether this be secret beaches, islands, cruising grounds, restaurants, dive sites, fishing grounds, etc).
This also translates to more remote destinations which are gaining in popularity with yachting adventurers – Alaska, The Antarctic, Galápagos Islands, Pacific Islands… I’m hearing increased talk of interest in the Sea of Cortez/Gulf of California, which Jacques Cousteau once called “The world’s aquarium”.
Continuing on this theme – we are also seeing a big uptick in the production of Explorer and Expedition vessels, which can offer an array of optionality for the more adventurous owner, including greater cruising range, more equipment on-board (helicopters and submarines especially), access to more remote locations, facility for extra provisioning, and simply the ability to explore more remote or hostile sea conditions. Some exciting examples of recent and new-build Expedition vessels include; Sherpa from Feadship, the ground-breaking 182m REV being built by Vard, Planet Nine built by Admiral, Icon Yacht’s Project Ragnar conversion, Damen SeaXplorers series, Olivia O by Ulstein Verft, Project Icecap from Lürssen, and many more. Looking ahead, consensus from the legal and professional services arena seems to be that in the next five to seven years, the industry will undergo increases in regulation and governance.
I believe we will see a better quality and consistency of service to owners and clients off the back of this unavoidable trend, which can only be a good thing. We all want clients and the outside word to see the yacht industry as a mature, fair, and accountable industry that carries its head held high. High-ticket items come with ‘high stakes’ scrutiny – professionalism coupled with privacy should be the goal. Wishing everyone involved in yachting a happy and exciting 2019 ahead, here’s hoping for positive growth, co-operation, and a robust year ahead!
Julian Krickl is the MD of Mercury Yachts, a boutique, independent yacht consultancy and brokerage, based in Mayfair, London – www.mercuryyachts.com
+44 7974 192270